Initia Foundation's LST Liquidity Bootstrapping

General
1

0. Proposer Info

  • Proposer’s Project Name: Initia Foundation
  • Proposer’s X (Twitter) Account: @initiafdn
  • Affiliation: Initia Foundation

1. TL;DR

This proposal aims to use 500k INIT from the Initia Foundation’s treasury to equally seed 4 core LST markets on Initia DEX for an initial period of 3 months before re-evaluation.

  • MilkyWay’s milkINIT - INIT
  • Cabal’s xINIT - INIT
  • Inertia’s sINIT - INIT
  • Drop’s deINIT - INIT

2. Background

Initia has been live for around 8 weeks and with it we’ve seen the beginning of the Interwoven Economy.

INIT or Enshrined Liquidity positions staked with validators on Initia have a 21 day unbonding period and provide stakers with protocol inflation. Currently, inflation is set to 1.25% of the Total INIT Supply / Year, with 80% of this inflation directed at INIT-USDC LP staked in Enshrined Liquidity and the remaining directed 20% directed towards plain INIT stake. Staking yield is currently ~66% for INIT-USDC and ~2.3% for plain INIT.

In the Interwoven Economy, there have been primarily 4 Liquid Staking Tokens (LSTs) developed by teams: milkINIT, xINIT, sINIT, and deINIT. These LSTs aim to provide a liquid token wrapper of the INIT or INIT-USDC staked with the protocol. While each of these has their own unique elements, these LSTs allow users to access staking yields, compose this capital in the economy, and have faster exists (at some open market rate) to avoid the 21 day unbonding period.

At the time of writing this proposal, these 4 LSTs are live along with their pools on Initia DEX but lack sufficient liquidity. This liquidity is important to enable quick exits back to INIT, unlock arbitrage, and facilitate more complex DeFi strategies such as liquidations and looping from lending markets.

Let’s take a quick look of the 4 LSTs.

MilkyWay’s milkINIT

  • Current Supply: ~817.57k
  • Type: Standard LST, accrues in value
  • Redeemable: Yes
  • APR: 2.1% + MilkyWay’s VIP Rewards = ~122%
  • Qualities: Receives VIP rewards given MilkyWay’s status as an L2. VIP distributed based on holding + use cases like deposits in Echelon.
  • Pool Details
    • milkINIT - INIT
    • Stableswap
    • Fee: 0.03%
    • A Factor: 20

Cabal’s xINIT

  • Current Supply: ~1.1m (including sxINIT)
  • Type: 2 token model
    • xINIT (point bearing and supposed to be 1:1 w/ INIT)
    • sxINIT (yield bearing and accrues in value)
  • Redeemable: No
    • The INIT behind xINIT/sxINIT is 2 year locked in Initia Governance to maximize Cabal’s VIP Gauge Vote power
  • APR:
    • xINIT = 0%
    • sxINIT = 2.1% + Bribe Yield = ~69%
  • Qualities: xINIT is supposed to be 1:1 with INIT and the yield + bribes generated behind the xINIT is delivered to sxINIT holders, similar to the USDe / sUSDe model from Ethena.
  • Pool Details
    • xINIT - INIT
    • Stableswap
    • Fee: 0.03%
    • A Factor: 50

Inertia’s sINIT

  • Current Supply: ~924.5k
  • Type: Standard LST, accrues in value
  • Redeemable: Yes
  • APR: 1.86%
  • Qualities: Receives VIP rewards on Inertia’s lending market.
  • Pool Details
    • sINIT - INIT
    • Stableswap
    • Fee: 0.03%
    • A Factor: 20

Drop’s deINIT

  • Current Supply: ~11k deINIT ~= 15.75k INIT
  • Type: LST of INIT-USDC LP staked in Enshrined Liquidity, accrues in value
  • Redeemable: Yes
  • APR: ~61.44%
  • Qualities: Integrated on Echelon and Rave, compounds rewards into a greater INIT-USDC Enshrined Liquidity position
  • Pool Details
    • deINIT - INIT
    • Weighted 50:50
    • Fee: 0.3%

3. Proposal Details

This proposal looks to use 500k of INIT from the Initia Foundation’s treasury to bootstrap liquidity for these 4 LSTs on the Initia DEX.

This liquidity injection is planned to last for 3 months. Throughout the 3 month period, the Initia Foundation will review each pool and determine if liquidity should be withdrawn, increased, maintained, or a proposal should be put forth to add it to Enshrined Liquidity (if not done already). The Initia Foundation will holistically look at factors such as community feedback, LST growth, use cases built for LST, DEX volume, and project roadmaps when making this decision.

The 4 pools have already been created on Initia DEX with the parameters mentioned above and the Initia Foundation will seed each of these pools with 125k INIT worth of liquidity.

Note for clarity, deINIT is an LPT of INIT-USDC in EL, for this pair the Initia Foundation will seed 125k of liquidity in INIT terms given some USDC must be supplied as well.

Timeline

June 19th: Forum Post to collect community feedback
June 23: Liquidity Added

Given this proposal seeks to use funds from the Initia Foundation, no governance vote is required. Rather, the Initia Foundation is seeking feedback from the community before proceeding.

5 Likes
2

Count us in. Deep liquidity for xINIT, milkINIT, sINIT, and deINIT is exactly what the interwoven economy needs to further mature. We also believe that the equal seeding gives every LST a fair start and lets market demand decide which wrappers scale.

For the xINIT-INIT pool specifically:

  • We will push to have the pool enshrined as quickly as possible
  • We will also layer on a nice Cabal Points boost for xINIT-INIT LPs

When it’s all said and done, LPs should be earning a consistent high double-digit APR from swap fees + INIT emissions + bribe yield + Cabal Points. This incentivizes a deep xINIT-INIT market that keeps our peg tight and gives sxINIT holders a clean path towards liquidity. No one gets trapped in a two-year lock and governance power keeps flowing where it matters.

The Cabal Foundation supports this liquidity-bootstrapping plan. Thanks for including xINIT in this initiative!

2 Likes
3

Inertia would like to express our sincere gratitude to the INITIA Foundation for providing and injecting liquidity into the LST pool.

Inertia’s sINIT-INIT liquidity pool plays a crucial role in offering users a more seamless and reliable route for DeFi activity.

Since sINIT can be used as collateral across various DeFi applications, this type of liquidity significantly improves the user experience.

As soon as the sINIT-INIT pool goes live, we’ll begin strengthening liquidity right away.
We remain committed to building an ecosystem that empowers users with powerful tools and frictionless experiences.

2 Likes
4

MilkyWay community welcomes this proposal and appreciates the Initia Foundation’s initiative to support liquidity across the LST ecosystem.

milkINIT is the first and one of the most active LSTs on Initia and is currently the highest-yielding LST with up to ~124% APR, including VIP rewards.

This liquidity injection will go a long way in enabling deeper integrations with our partners, improving accessibility, and making milkINIT usable across more parts of the Initia ecosystem.

To welcome and support this proposal, we’ll also be deploying 50,000 MILK to incentivize the milkINIT-INIT LP on Initia DEX in the coming days. Public announcements with the exact timeframe and details will follow.

We’ll be putting this liquidity to work over the coming days, expanding integrations and making sure milkINIT is accessible to everyone.

Appreciate the support from the Initia Foundation.
Let’s grow the pie together :glass_of_milk:

2 Likes
5

Heyo! I’m extremely excited about this move and this is exactly the kind of kickstart the Interwoven Economy needs to push ahead. On the same page about:

  • milkINIT: The most trusted LST team.
  • xINIT: Greases the wheels of VIP. It’s a Very Important P(T)oken.
  • sINIT: Will greatly help with liquidity depth in sINIT’s lending market as a second order effect.

But I have my concerns about applying the same weightage of the pool to deINIT.

  • deINIT has shown stunted growth, and barely any signs of demand.
  • As far as I know, Drop’s team doesn’t use the voting power acquired from the position productively or in any way at all (happy to be corrected here).
  • This pool will lead to much higher IL for the Foundation funds.

I still think it’s a valid move to seed deINIT as well, but with a small percentage of the 500k pool. Other LST teams & protocols have shown more promising signs.

After all, the Foundation needs to be very mindful of seeding the LSTs because it isn’t just leasing out liquidity, but political influence in the form of staked positions.

3 Likes
6

I think your point is valid in that deINIT has shown much slower signs of growth as opposed to the other LSTs.

However, I think it’s still worthwhile for the foundation to treat each LST equally given how early the economy is.

There are a few rollups that have plans to integrate deINIT because it is quite high yielding and unique. I’m not sure if growth has been stagnant due to friction of accessing deINIT or for other reasons. Therefore I think it’ll be worthwhile to see growth and volume over this 3 month period.

1 Like
7

Now that wasn’t so difficult, was it?

Echelon integration & MILK incentives for DEX liquidity is precisely what I had asked from you clowns on Day 1 launch, lack of preparation has cost you & Initia ecosystem dearly in the process.

While the move might seem directionally correct, it’s too little, too late & clear that current price action for Initia doesn’t inspire/reinforce confidence within the hub token & corresponding ecosystem.

8

Any enshirend liquidity plan for eco tokens, like ONYX-INIT \ BFB-INIT?